To have a great idea for a Start-up is a very good predisposition for a successful business. Despite this amazing thought, unfortunately a lot of Start-ups fail at the beginning.
According to the statistics 34% of entrepreneurs are 20-29 years old and 40% are between 30-39 years old once they start their first business. Most of the people in this age are already well-educated and they do not have many savings. It makes them look for alternatives, which could support the first critical years of their Start-up. At the beginning no one wants to invest in an unknown business, which leaves them with the idea of borrowing money elsewhere. As a matter of fact, no one wants to take a disadvantageous loan, so young entrepreneurs usually ask their family and friends for help, but by taking this kind of money, they are putting the good friendships and relationships at stake. So what are the options? Where can a fresh entrepreneur start looking for help and financial support?
The answer should be clearer after reading this paper. The goal we are trying to reach, is to give a better overview of the options of financing, the advantages and disadvantages of different methods and show it on real life examples. One of the most important thing is to be well informed about the possibilities which are available, so it may come to the realization of the original idea and building of a successful Start-up.
In order to give a better insight on this topic, we will also choose existing Start-ups and analyse what methods they have used, how they were implemented and what they had to give in return. We will pick not only from the successful ones, but also from the less fortunate businesses as it’s important to understand the know-how of winners just as important as to know the mistakes of others.
Table of Contents
1 INTRODUCTION
2 START-UP
2.1 START-UP PHASES
2.1.1 Concept /Seed Phase
2.1.2 Start-up phase
2.1.3 Emerging-Growth-Phase
2.1.4 Expansion-Phase
3 FINANCING METHODS
4 DEEPER INSIGHT IN CHOSEN METHODS
4.1 CROWDFUNDING
4.1.1 Types of Crowdfunding
4.1.2 Advantages and disadvantages of Crowdfunding
4.1.3 Tips to Crowdfund the Start-up
4.2 BOOTSTRAPPING
4.2.1 Advantages and Disadvantages of bootstrapping
4.2.2 Tips to bootstrap the start-up
5 CONCEPT OF A LOAN BY THE “VR BANK ROSENHEIM CHIEMSEE“
6 ERP FOUNDER LOAN – STARTING MONEY
7 THE BUSINESS PLAN
7.1 THE EXECUTIVE SUMMARY
7.2 COMPANY DESCRIPTION
7.3 MARKET ANALYSIS
7.4 ORGANIZATION AND MANAGEMENT
7.5 SERVICE OR PRODUCT LINE
7.6 MARKETING AND SALES
7.7 FUNDING REQUEST
7.8 FINANCIAL PROJECTIONS
7.9 APPENDIX
8 SUCCESSFUL START-UPS
8.1 DELIVERY HERO
8.2 SPOTIFY
9 START-UP FIASCOS
9.1 KNOWN REASONS FOR FAILURE
9.2 AKA-AKI GMBH
9.3 KAZZONG
10 CONCLUSION
11 REFERENCES
Objectives and Core Themes
This paper aims to provide a comprehensive overview of various financing options available to early-stage businesses. It examines the pros and cons of different capital acquisition methods and illustrates these concepts through real-world case studies of successful and unsuccessful startups.
- Analysis of startup life cycle phases and associated financing needs.
- Detailed exploration of Crowdfunding and Bootstrapping strategies.
- Overview of bank loan options, specifically the German ERP Founder Loan.
- Essential components of a professional business plan for investors.
- Case studies highlighting factors contributing to both success and failure in startups.
Excerpt from the Book
4.1 Crowdfunding
The first method is crowdfunding. “Crowdfunding is the process of asking the general public for donations that provide Start-up capital for new ventures. Using the technique, entrepreneur and small business owner can bypass venture capitalists and angel investors entirely and instead pitch ideas straight to everyday internet users, who provide financial backing.”12 The contributions can be in small amounts, for example 1€, or large amounts such as thousands of dollars and sometimes even millions. The starting capital is not from banks or from large-scale investors but from small investors. Crowdfunding uses Internet to talk to thousands of potential investors. There are lots of crowdfunding websites like Kickstarter or Seedmatch in Germany where everyone can suggest their project, idea or company by using text, photos or a short video.
Then it can be determined how much money is needed, to which date and what the investor gets back. If the goal is not reached until the deadline the money usually returns, but sometimes it can be reworked, the concept and presentation with one of the investors and through that more supporters can be acquired. In the last years more and more people use crowdfunding to finance their Start-up. For example, in 2015, nearly 80,000 people gathered more than 20 million USD on Kickstarter for a company that developed a smartwatch alternative to the Apple Watch.
Summary of Chapters
1 INTRODUCTION: Outlines the necessity of finding creative financing solutions for young entrepreneurs who lack personal capital.
2 START-UP: Defines what constitutes a startup and examines the cultural and organizational environment of early-stage companies.
3 FINANCING METHODS: Provides an initial overview of common funding sources, emphasizing the importance of bootstrapping for early business development.
4 DEEPER INSIGHT IN CHOSEN METHODS: Offers a detailed look at Crowdfunding and Bootstrapping, including their respective advantages, disadvantages, and practical tips.
5 CONCEPT OF A LOAN BY THE “VR BANK ROSENHEIM CHIEMSEE“: Discusses the requirements and documentation necessary for obtaining a traditional bank loan in Germany.
6 ERP FOUNDER LOAN – STARTING MONEY: Examines a specific state-supported loan program for founders, highlighting its conditions and risk mitigation.
7 THE BUSINESS PLAN: Breaks down the core sections of a professional business plan required to convince potential investors.
8 SUCCESSFUL START-UPS: Analyzes the success stories of Delivery Hero and Spotify as examples of scaling and attracting investment.
9 START-UP FIASCOS: Investigates the primary reasons for business failure, supported by examples like Aka-Aki GmbH and Kazzong.
10 CONCLUSION: Summarizes the necessity of matching the right financial strategy to the unique needs of a business life cycle.
Keywords
Start-up, Financing, Crowdfunding, Bootstrapping, Business Plan, ERP Founder Loan, Venture Capital, Private Equity, Entrepreneurship, Market Analysis, Financial Projections, Startup Failure, Success Factors, Investors, Capital Acquisition
Frequently Asked Questions
What is the primary purpose of this work?
The paper serves as a guide for entrepreneurs to understand various financing methods available during the different phases of a startup's life cycle.
Which financing methods are covered in detail?
The book focuses primarily on Crowdfunding and Bootstrapping, while also touching upon traditional bank loans and state-supported programs.
What is the main goal or research question?
The goal is to provide an overview of financing options, their pros and cons, and to demonstrate their implementation through real-world examples.
What scientific methods are utilized?
The author performs research on common financing sources and analyzes the histories of both successful startups (e.g., Spotify) and failed ones (e.g., Aka-Aki GmbH).
What does the main body of the work cover?
It covers the life cycle of startups, detailed strategies for raising capital, how to structure a business plan, and the common pitfalls that lead to bankruptcy.
Which keywords best describe the content?
Core keywords include Startup, Financing, Crowdfunding, Bootstrapping, Business Plan, and Entrepreneurship.
How does the author characterize a typical startup?
A startup is described as a new, emerging business that seeks to establish its market position by offering innovative products or services, often in a flexible and informal cultural setting.
Why is the "Executive Summary" crucial for a business plan?
It is the first chance for a founder to grab the interest of a potential investor by clearly stating the company's status, goals, and why the idea is unique.
What role does the KfW Institute play in the described loan process?
The KfW provides an 80% contract of indemnity for the financing partner, which reduces the financial risk for the entrepreneur when applying for an ERP Founder Loan.
Why did Aka-Aki GmbH fail according to the analysis?
The failure was attributed to the founders' inability to manage rapid growth and server overloads, which led to internal disagreements and a loss of financial support.
- Quote paper
- Daniel Keller (Author), 2016, Start-Up Financing. Where can a fresh entrepreneur start looking for help and financial support?, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/375501
